Working to Live vs. Working to Scrape By – Why Living Wages Matter

Who is accountable and responsible for ensuring workers can afford the products or services they make/offer? The employer of the workers? The government? Is anyone responsible at all?

Cultural, historical, and moral influences shape how we think about this responsibility, who (or what institutions) should carry it, and how “livability” should be measured and calculated. These complexities may help explain why there is still some debate over what a “living wage” is and what is included in the concept. From the MIT Living Wage Institute, “a living wage is what one full-time worker must earn on an hourly basis to help cover the cost of their family’s minimum basic needs where they live while still being self-sufficient.”

Compensation influences the health and longevity of workers’ lives

Social determinates of health are conditions which directly influence the health and longevity of an individual person. Poor quality of food, housing instability or lack of access altogether, lack of physical safety, social isolation, and lack of access or eligibility for support from social service programs can contribute to shorter lifespans.

Empirical evidence exists that living in poverty leads to worse health and life outcomes for nearly every person who experiences it. In the U.S., poorer workers live on average 10-15 years less than their more economically stable counterparts. This gap is an extraordinary finding in longevity outcomes. Poorer workers are also often more likely to be from a marginalized population, such as people living with disabilities, people of color, members of the LGBTQIA+ community, women, immigrants, and more.

It has become increasingly difficult to ignore the consequences of offering unlivable wages. Low wages contribute to a double penalty for low-income employees - a poorer quality of life occurring during a shortened lifespan. It also directly translates into the labor force available to perform work and, therefore, into a business’s ability to participate in the economy.

Where do businesses come into this discussion?

When economic conditions are tough and wages are a distraction, both productivity and performance suffer. Businesses may find it difficult to maintain their staffing levels without taking true human needs and the costs to meet those needs into account when setting pay levels and taking pay actions.

If you are a business wanting to get the most out of your employees’ capabilities, helping them live a longer and healthier life is a worthy consideration. To do this, employees need to be able to afford to cover their basic needs at a minimum.

A mini-study on living wages was conducted by WorldatWork in 2024, with the following responses on the top 5 organizational motivations to pay living wages:

Paying livable wages leads to higher retention, higher productivity, and deeper personal loyalty to the employer. Offering respectful compensation and dignity to employees by paying them enough to survive, and ideally thrive, makes a significant impact on a person’s psychological and physical well-being. To be fair, there are real and significant challenges to being able to pay living wages to employees. Budgets are not unlimited and economic conditions vary, sometimes wildly. But consider this: participation in the labor force is only possible when a person is healthy enough to perform the duties asked of them. 

The butterfly effect of compensation

There are many benefits to healthier workforces on a macro and a micro level. Like dropping a pebble into a pond changes to internal strategies, like increasing an internal minimum wage to the level of a living wage, creates ripple effects through other systems and functional relationships. A person who can meet their basic needs with their paycheck is theoretically more able to respond to the challenges of daily life, perform their work effectively and well, and ideally more apt to participate in their communities. If someone is working three jobs just to keep the lights on, there’s very little (or no) time to wash dishes and laundry or help the kids with homework, which means there is certainly no time for volunteering at the monthly litter pick-up or ivy pull in the park.

Working toward implementing a living wage

Philosophical alignment with the leadership team is imperative. Beginning with an assessment of the current total rewards strategy and the underlying philosophy of the organization’s approach to total rewards can serve as a baseline to assess any potential changes to make. A benefits audit or benchmarking analysis can be a helpful tool for examining low- or no-cost adjustments before making significant adjustments or investments in new or improved offerings. Effective benchmarking of market rates for costs of labor can help an organization determine what additional increase would be needed to bridge the distance between costs of labor and the costs of living in the market(s) of operation.

While tight budgets are often cited as a barrier, employees today are less willing to accept below-market wages in exchange for culture or flexibility alone. These factors still matter, but they don't replace the need for fair, livable compensation, especially as costs rise. Organizations committed to offering a living wage can often reallocate existing resources by redirecting funds from underused perks, reevaluating benefits, renegotiating vendor contracts, or simplifying bonus structures to boost base pay. Adjusting staffing models or reducing discretionary expenses, such as events, travel, or branded swag, can also support a more sustainable approach. Ultimately, offering a living wage is not just a financial move; it reflects an organization’s values and commitment to its people.

Is your organization in a season of change? Our compensation team recently presented on living wages and is a resource to help organizations evaluate and implement living wages as part of a compensation and/or total rewards strategy. We’d love to connect – reach out to Cascade’s Compensation Team to start the conversation.